New Jersey Ethics Opinion
State of New Jersey
ETHICS OPINION 603
1. It is ethical for an attorney to borrow funds from a third party lending company to cover litigation expenses, or to fund his law practice.
2. It is ethical for that attorney to pass on to the client, as an appropriate litigation expense, any interest and charges on any such loan, to the extent of that portion of the loan which funded that client´s case.
New Jersey Ethics Opinion 603 is copied in its entirety below:
The inquirer asks our opinion concerning the ethical propriety of the below described provision in a contingency fee arrangement in a tortious conduct matter, where it is appropriate for the firm to advance disbursements, pursuant to RPC 1.8(e), to be reimbursed pursuant to RPC 1.5(c) and R. 1:21-7(d). The proposed provision would be made clear to the client at the outset of the litigation and would be instituted only if the client agreed to the same.
Under the proposed provision, the inquirer’s law firm would borrow the funds to cover the disbursements in the matter from a third party lending company at the most favorable available interest rate. Upon the favorable outcome of the matter, the firm would reimburse itself for both the principal and interest charges relating to the borrowed funds and presumably would deduct the total from the recovery before computing the net sum subject to the contingency fee arrangement pursuant to R. 1:21-7(c) and (d).
We find nothing unethical or contrary to the letter or spirit of the rules of the Court, or Rules of Professional Conduct in the proposed provision. This Committee’s Opinions 446, 105 N.J.L.J. 105 (1980), and 582, 117 N.J.L.J. 394 (1986) and the Notice to the Bar published in 101 N.J.L.J. 265 (1978) authorizing credit card use for legal fees attest to the recent liberalization of the attitude of the courts and the bar, recognizing that appropriate and reasonable interest charges or credits in various situations are not unethical as long as they are made clear to the client at the outset of the retention and the client agrees to the same.
The cited New Jersey Ethics Opinion may be found on the web at: http://njlaw.rutgers.edu/collections/ethics/search.php
Please reference your local state ethics rules.